Cashback Mortgages NZ — Are They Worth It?

Several NZ banks offer cashback payments of $1,000–$5,000+ to borrowers who switch their mortgage to them. It sounds like free money — but cashback deals often come with hidden costs, rate trade-offs, and clawback clauses that can make them less attractive than they first appear.

What Is a Mortgage Cashback?

A cashback is a lump-sum payment made by the new lender when your mortgage settles with them. It’s typically calculated as a percentage of the new loan amount — commonly 0.5%–1.0%.

Example: 0.8% cashback on a $700,000 mortgage = $5,600 cashback

Cashbacks are most commonly offered to:

Borrowers refinancing from another bank (not their own)
First home buyers settling with the bank for the first time

The True Cost: Cashback vs Rate

The most important thing to understand: cashback comes at a cost to your interest rate. Banks aren’t giving away money — they price the cashback into the product. A bank offering a $5,000 cashback on a $700,000 loan will typically offer a slightly higher rate than a bank offering no cashback.

The comparison you need to make:

Option A: Bank with cashback

Rate: 5.65%
Cashback: $5,000
Annual interest (approx.): $700,000 × 5.65% = $39,550

Option B: Bank without cashback

Rate: 5.45%
Cashback: None
Annual interest (approx.): $700,000 × 5.45% = $38,150

Rate difference: 0.20% per year = $1,400/year more with the cashback bank After how many years does Option B save more than the $5,000 cashback? 3.6 years

If your fixed term or clawback period is 2 years, you’re ahead with the cashback. If you stay on Option A’s rate for 4+ years, the cashback costs you more than it saves.

The lesson: Compare total cost (interest + cashback), not just the cashback amount.

Clawback Clauses: The Hidden Risk

Every cashback mortgage comes with a clawback provision — if you refinance away or fully repay the mortgage within the clawback period, you must repay some or all of the cashback to the lender.

Typical clawback structure:

Full clawback if you leave within 12 months
50% clawback if you leave within 12–24 months
Some banks apply clawback for 3–4 years

Example: You accept a $4,000 cashback with a 2-year full clawback. 18 months later, a better rate appears elsewhere. To switch, you must pay back $4,000 (plus the break fee on any remaining fixed term). The cashback becomes a switching trap.

Key questions to ask before accepting cashback:

What is the clawback period?
Does clawback apply if I sell the property and repay the mortgage?
What is the clawback structure — full amount, proportional, or tiered?

Some banks apply clawback for property sales; others don’t. If you’re planning to sell within 2–3 years, be cautious about accepting a cashback with a broad clawback clause.

Current Cashback Offers

Cashback offers change frequently and differ by bank, loan size and clawback period, so check each bank’s current offer directly or through your broker. These change regularly.

When Cashback Makes Sense

A cashback deal is most attractive when:

The rate is competitive — the cashback bank’s rate is close to (within 0.10%–0.15%) the best available rate, so the rate cost is minimal
You plan to stay — you have no plan to sell or refinance again within the clawback period
You need the cash now — the cashback helps cover switching costs, legal fees, or is genuinely needed
The clawback terms are reasonable — proportional clawback over 2 years is manageable; full clawback over 3+ years is a significant lock-in

When to Skip the Cashback

Avoid cashbacks when:

The rate is meaningfully higher than alternatives — even with the cashback, you’ll pay more over the fixed term
You might sell or refinance again within the clawback period
The clawback applies to property sales (very restrictive — you can’t exit the property without repaying)
A broker has identified a much better rate at a bank not currently offering cashback

How to Find and Compare Cashback Deals

Use a mortgage broker — brokers have current knowledge of cashback offers across all lenders and can include this in a total-cost comparison
Ask explicitly when comparing rates — “Do you have any cashback or incentive currently available for refinancers?”
Do the full maths — cashback ÷ annual rate saving = break-even period. If the break-even is within the clawback period, the cashback is likely a net positive. If it’s longer, the rate difference matters more.
Read the cashback terms in writing — don’t rely on verbal descriptions of clawback terms

Cashback and the Switching Process

Cashback is typically paid:

Within a few weeks of settlement, often directly to your bank account
Sometimes into the new mortgage as a balance reduction (check — you usually want it paid to you directly)

Cashback is taxable income in NZ if received in connection with a mortgage for a rental property (deductible income activity). For owner-occupier mortgages, it is generally treated as a capital/non-deductible receipt. Confirm with your accountant if you’re uncertain.

Where to check the latest data

Rates, fees and returns change often. Before deciding, check current figures yourself:

interest.co.nz mortgage rates: tables of current floating and fixed home loan rates.
The provider's own website: has its current rates, fees and full terms; these change more often than any comparison page.
Financial Service Providers Register: shows whether a provider is registered to offer financial services in New Zealand.